Head of Universal Credit denies IT problems

The director general of the government’s Universal Credit programme has denied problems with the IT platform.

A number of reports have surfaced citing issues with the system, from changing direction away from agile software and contractors being told to stop working on the project, to the budget getting out of hand and costing six times the original figure.

However, Howard Shiplee – the fourth person to head up the project in just six months – has denied any technical disasters behind the scenes.

Answering to the chair of the House of Commons work and pensions select committee, Anne Begg, who asked whether there was substance behind the reports, the executive said: “No, that is not the case. We are currently reviewing all that has been built.

“The existing systems that we have are working, and working effectively. What we are now looking at is how we can make sure that our existing systems, our legacy systems and the systems that have been built over the last 18 months [are maximised] and to ensure that we can dock the new systems that we are designing into those and the legacy systems.”

Yet, there were still questions around whether the Universal Credit IT project would be completed by the deadlines set by parliament.

The work and pensions minister, Iain Duncan Smith, and parliamentary under-secretary of state for welfare reform, Lord Freud, described to the committee how they planned to test the IT system over the coming months and slowly try out more complex cases than the current test bed of jobseeker’s allowance claimants.

However, Begg complained that they were moving too slowly to hit targets for 2014 and to get the whole system implemented by 2017: "We would rather that you get it right than rush it. However, there is rushing it and [there is] snail’s pace.”

Duncan Smith snapped back at the chair, saying: “This committee has constantly said they don’t want to see us go too fast on this. We are not snail pacing. There has been a lot we have learned already… [but] the real point here is we could stick rigidly to a summary plan in 2011 or say the purpose is to deliver 2013 to 2017.”

“We want to get into large volumes next year… but get to that in a safe and secure way. [This] is why we are rolling out in the way we are rolling out."

Today, the DWP announced a further six job centres would trial the Universal Credit system from October – although it seems this will just be for jobseeker's allowance benefits – and 20,000 employees would be trained both use it and train others to do so.

It also said plans were being put into action to work with the Government Digital Service (GDS) to ensure the system kept up to date with changes in technology.

Dominican Republic Strengthens Tax Credit Film Incentive

BUENOS AIRES – With the aim of strengthening the local film industry, the Dominican Republic promulgated Law 82-13, which solidifies and improves the existing film incentive framework by expanding the scope, term and liquidity of the competitive 25 percent tax credit on all above and below the line expenditures related to the production of feature films and TV series.

Announced last Friday, the new legislation is expected to generate direct and indirect economic output exceeding $1.2 billion, as well as creating more than 25,000 new high value-add jobs, within the next five years.

The new set-up includes a 100 percent income tax deductibility for Dominican corporate taxpayers of their investments in eligible Dominican film production companies, with a maximum direct offset of 25 percent of their year income tax liability. This provision alone is expected to generate a significant funding base for eligible Dominican film productions, which must adhere to certain cultural requirements such as a Spanish language majority and production location in the DR.

Finally, a substantial long-term 100 percent income tax exemption, for a period of up to 15 years, is granted to investors promoting the development of new industry related infrastructures (studios, movie theaters, etc.), and to distribution and technical service providers that will establish their business in the country.

Earlier this year, the Dominican Republic film industry received a strong input when the International Finance Corporation, a member of the World Bank Group, announced a direct investment of $20 million in Dominican-based company Indomina Group, in addition to facilitating $10 million through a loan syndication placed in the international banking market.

Indomina is currently undergoing a $70 million construction of Pinewood Indomina Studios in the Dominican Republic, and will reach a total invested value in the state-of-the-art infrastructure of $70 million once the construction of the first phase is completed by the end of this year. The studio’s brand new 60,500-sq. ft. water effects facility was inaugurated a few weeks ago by Indomina chairman Felipe Vicini, together with DR president Danilo Medina and Rt. Hon. Hugo Swire, minister of the U.K. Foreign Office.

"The competitiveness of the Dominican Republic as a preferred film and TV production destination is a result of an array of the fiscal measures offered in the country," said Vicini, who added that this set of film incentives is a key component to allow film and TV content producers to partially finance their projects.

China targets shadow bankers in credit squeeze

China's central bank is applying pressure to the country's shadow banking system.

Beijing's tactics are designed to crack down on the banks, securities dealers and underground operators that make up the country's flourishing shadow banking system.

The government's concern is that lending has grown too big, too fast, and it hopes higher rates will restrain that expansion. At the same time, the fear among investors is that the lending crackdown could slow the economy more than expected.

In recent years, shadow banks have carved out a niche trade in China. They offer loans to small and medium-sized companies that are ignored by large state-run banks. Often, the loans are packaged and sold to investors looking for higher returns.

In many cases, the shadow lenders provide a valuable service -- offering capital for run-of-the-mill projects that would otherwise go unfunded.

This is no small operation. The shadow banking sector's exact reach is unknown, but the Fitch ratings agency estimates its size has reached roughly 60% of China's GDP.

But Beijing is now worried that credit is becoming inefficient, increasingly dominated by unregulated lenders and reaching a scale where it could sap growth.

By allowing rates to rise, the central bank is signaling that the era of easy credit -- which has helped spur shadow banks -- is over.

The central bank last week allowed the rate at which Chinese banks lend to each other to hit a record high above 13%. Another key measure of cash in the banking system -- the seven-day "repo rate" -- peaked at 25%.

Under normal circumstances, the central bank would have moved quickly to provide liquidity and lower rates. But the bank stood idly by as investors grew increasingly nervous over the bank's inaction and lack of guidance. The unease manifested in equity markets, which were battered as rates increased.

Some clarity emerged over the weekend, when official state media reported that the China's shadow banking system was indeed the central bank's target.

"It's not that there's no money," a Xinhua commentary said. "It's that the money is not in the right places."

Related story: In China, a little bit of financial chaos is just fine

The decision not to jump in and push down borrowing rates for financial institutions is seen as a way to force them to get back to traditional banking. Beijing had recently issued warnings to its banks to avoid risky loans and excessive expansion of credit.

The central bank broke its silence on Monday, indicating that its harsh medicine is likely to continue.

"Commercial banks must pay close attention to the liquidity situation in the market and must strengthen their analysis and forecasts of factors affecting liquidity," the central bank said in a note posted Monday but dated June 17.

Related story: Is China's debt: a crisis in the making?

The bank elaborated after a wild day of trading on Tuesday, going so far as to hold a press conference and issue a pledge to keep lending rates at a reasonable level.

Mark Williams, chief Asia economist at Capital Economics, said in a research note Monday that the central bank's efforts to rein in credit were the strongest sign yet that China's leadership is "willing to suffer short-term economic pain if necessary to achieve more sustainable growth."

But Williams also said the lack of communication from the central bank was troublesome.

"By most standards, the behavior of the People's Bank over the last couple of weeks has been extraordinarily reckless," he said. "It did not intervene as interbank rates spiked to extreme levels, despite having the tools to do so, and it offered no explanation for its inaction."

China stocks crater as banks warned over credit

The People's Bank of China told the country's largest banks Monday to rein in risky loans and improve their balance sheets, a warning that sent a jolt through already unsettled equity markets.

The Shanghai Composite lost 5.3% of its value and closed well below the 2,000 point barrier, the latest in a series of dismal performances. The struggling index is now down 13.5% from the start of the year.

The sell-off comes after short-term borrowing costs skyrocketed last week in China, leading to a credit crunch.

The rate at which Chinese banks lend to each other overnight hit a record high above 13% last week before moderating. Another key measure of cash in the banking system -- the 7-day "repo rate" -- peaked at 25%.



Rates continued to stabilize on Monday. But analysts questioned why the bank's leaders had not quickly intervened, and why the bank's intentions were not communicated to investors as rates continued to rise.

Official state media unraveled some of the mystery over the weekend, reporting that the China's shadow banking system was the central bank's target. "It's not that there's no money," the Xinhua commentary said. "It's that the money is not in the right places."

Some analysts worry that China's credit boom has saddled unworthy businesses with large loans, fueled the country's shadow banking system and put local governments on the hook for billions.

Related story: Is China's debt a crisis in the making?

A credit squeeze by the central bank would discourage risky loans, and help China's economy complete a rebalancing that most experts say is required to secure long-term growth.

The central bank suggested Monday that its tough medicine is likely to continue.

"Commercial banks must pay close attention to the liquidity situation in the market and must strengthen their analysis and forecasts of factors affecting liquidity," the central bank said in a note posted Monday but dated June 17.

The notice also said that banks must "prudently manage liquidity risks that have resulted from rapid credit expansion" and "appropriately contain the pace of loans and bill financing."

As of now, the central bank said, "overall bank liquidity conditions are at a reasonable level."

Related story: Central banks put on notice over stimulus

Nomura economist Zhiwei Zhang said the guidance note suggests that the central bank's policy stance will remain tight.

"We believe this is another sign that the PBoC is not willing to loosen policies or inject liquidity to bring down interest rates," Zhang said.

Growth in China slipped to 7.8% last year. The government's target for this year is 7.5%. But the risk of a disappointment is rising and with it the prospects of a weaker-than-expected recovery in the global economy.

Many economists have downgraded their growth projections for China's economy, with some warning that an expansion of less than 7% is possible in the second half of the year.